Sh2.9 billion lies unclaimed after collapse of banks

Dar es Salaam. In what appears to be an unusual move given the current economic situation, it is reported that Sh2.9 billion has gone unclaimed by bank depositors.

This sum was intended to recompense those whose banks were liquidated.

The Deposit Insurance Board (DIB) made the revelation last week during a meeting with editors here in the city.

The unclaimed money comes from banks that were liquidated starting in 2000, and according to DIB, they represent uncollected compensation through September 2023.

Since DIB started operating in 1994, a total of nine banks have closed shop and so had to be liquidated. The banks that have gone under were Greenland Bank Tanzania Limited (2000), Delphis Bank Tanzania Limited (2003), FBME Bank (2017), Mbinga Community Bank Plc (2017), Njombe Community Bank Limited (2018), Meru Community Bank Limited (2018), Covenant Bank for Women (T) Limited (2018), Kagera Farmers’ Cooperative Bank Limited (2018), and Efatha Bank Limited (2018).

The DIB’s director, Mr Isack Kihwili, says the Sh2.9 billion owed to depositors of these liquidated banks is for those whose value did not exceed Sh1.5 million upon the closure of the financial institutions.

The total amount of compensation from the nine banks was valued at Sh11.97 billion, of which 75 percent has been collected, while the rest remains in the public financial institution coffers.

“The number of clients whose deposits were insured is 58,036. However, 36,355 have not collected their compensation, which is an average of Sh82,000 for each individual,” Mr  Kihwili said.

He also added that the majority of those who have not claimed their compensation had a deposit of less than Sh20,000, with only a few having between Sh20,000 and Sh1.5 million.

Mr Kihwili said that even though most depositors do not follow up on their compensation due to the small amount in their accounts, some have other reasons because records show that their deposits were substantial.

“We have made efforts to encourage depositors to collect their compensation by making public announcements,” Mr Kihwili said, adding that the compensation can be claimed at Tanzania Commercial Bank (TCB).

With the law remaining silent on the fate of unclaimed deposit compensation, DIB decided to invest the cash by buying bonds and other safe investments in order to maintain its value instead of letting it stagnate.

A depositor of one of the liquidated banks says he used the account to receive proceeds from selling coffee; however, he would often withdraw the cash, so he hasn’t bothered to claim compensation because he knows the amount that was left is very little.

When a bank is liquidated, that marks the official end of its operations. There is no chance for revival.

However, an employee of Efatha Bank, which was liquidated in 2018, says that due to the bank belonging to a religious institution, its former clients who are also members of the church believe that the bank will be revived.

“This is misguided hope,” said DIB senior accounting officer Romuli Mtui.

There is no statutory recourse for a bank that has been liquidated pursuant to the law.

“When a bank is liquidated under the guidance of the Bank of Tanzania, that marks the end of its operations,” he said, further advising depositors to collect their compensation and not live with the false hope of a miraculous resumption of business for a liquidated financial institution.

Efatha clients were entitled to Sh1.48 billion upon liquidation, of which Sh1.04 billion has been claimed, while Sh437.3 million remains uncollected.